Consumer magazines: a ten-year perspective
Luci Rathan, IPC Magazines, overviews the factors that will shape the consumer magazine market over the next decade
IT IS NOT EASY to predict how the magazine medium will develop over the next ten years: that is a long time and a lot can change. But if nothing else, the magazine is an enduring medium. For instance, the Field is 142 years old; Country Life is celebrating its centenary next year; the Economist is 153 years old; Horse & Hound 112 years; Good Housekeeping 74 years; and Radio Times 73 years. These are all highly successful magazines and well-known brands that continue to be relevant to both their readers and their advertisers.
Editorial excellence, value for money and continuous innovation will determine the long-term success of any medium. Those magazines that exist today, that are well written and clearly understand their readers, that are well branded and easily accessible, that offer value for money and provide a USP, and continue to do this over time, will remain successful.
But there are other factors that operate on shorter time frames that will affect the shape of the consumer magazine market. For example, economic and competitive pressures, consumer 'fickleness' and fashion trends, technological and legislative changes, and so on.
ECONOMIC AND COMPETITIVE PRESSURES
The impact of economic and competitive pressures will be wide ranging. For simplicity I will try to categorise these, looking first at the consumer magazine market on a macro level, and then looking in more detail at some specific issues.
The growth of consumer magazines
Total market sales of consumer magazines have grown by over five per cent in the last five years, outperforming other media formats. Over the same period daily newspaper sales have fallen by nine per cent, radio listening hours are down by five per cent and television viewing (average weekly) is down by 0.5 per cent. It is likely that this trend will continue for some time, despite the impact of the National Lottery instant scratch cards which have reduced sales in some magazine sectors by as much as five per cent.
The UK consumer magazine market is attractive. It is growing, it is a relatively high-margin business (in comparison to say fmcg, petrol or grocery retailing), the costs of entry are relatively low because of desk-top publishing (this compares to the breakfast cereal market where you cannot launch on less than £7 million), and so it is relatively low risk. There is also relatively low competition (in comparison to say the washing powder market). Generally, attractive markets with low barriers to entry attract new entrants and have a high rate of launch activity. This certainly seems to be the case with over 200 magazine launches in 1995 alone.
A high launch rate means that most sectors are becoming increasingly segmented and competitive, particularly those that are mature and profitable (for example, the women's weeklies and the football weeklies). In addition to this, we are seeing increasing acquisition activity among the major players, and this further accentuates the competitive nature of the market.
On a macro level, we can expect the market to continue the trends already established: it will continue to grow and attract new entrants, supporting lots of launch activity and leading to increased choice within market sectors, increased segmentation and competition.
Advertising expenditure in consumer magazines is growing at approximately five per cent a year: more slowly than radio but faster than newspapers. The absolute rate of growth is less important than the relative growth (the absolute rate reflects the economy as a whole, and there is little that we can do about that).
As total volume sales of newspapers decline and as total listening hours of radio and viewing hours of TV decline, the economics do not work in favour of these media. The magazine market, however, is growing, and increasing segmentation means greater ability to target specific audiences. Sponsorship opportunities also remain largely untapped. Over the next few years we may well see the relative growth of magazines as an advertising medium.
Circulation and distribution trends
Some circulation and distribution trends will be highly influential in the way that the market develops. For instance, WH Smith and Menzies are both reducing the range of titles they carry (proliferation of titles has put pressure on display space). Delisting low circulation titles will encourage a shift toward subscription sales. Indeed, the high cost of sale-or-return (SOR) will also encourage a shift towards subscriptions as a preferred distribution mechanism for smaller circulation, specialist titles.
In the last few years there has been a shift away from traditional CTN outlets towards convenience stores, petrol stations and supermarkets, reflecting the change in shopping habits. As these types of outlet become more professional and devote more space to marketing magazines this trend is likely to continue.
As WH Smith and Menzies reduce their range, supermarkets and convience stores are increasing theirs. The net result will be that the top 400 or so titles will get the display space at the expense of smaller circulation, specialist titles. This will tend to favour large publishers over smaller ones and will perhaps encourage a consolidation in magazine ownership. Indeed, there is an increasing trend towards acquisition by the major players (IPC, EMAP and Future in particular).
As well as stimulating subscription sales, the high cost of SOR is likely to drive further improvements in distribution efficiency. Retail distributors (supermarkets in particular) are demanding standardisation in distributor/ wholesaler sales information and analysis. Given that the supermarkets are becoming more important customers, they are likely to get their way. Indeed, this is already happening under the PPA Blueprint for Harmony initiative.
In summary, the magazine distribution chain will have to become more efficient and professional, subscription sales are likely to grow and more of our magazines will be sold in supermarkets and convenience stores.
Let us now look at some other factors that might affect the consumer magazine market.
The men's lifestyle sector is growing at around 40 per cent year-on-year in circulation terms, and the young women's sector is also growing rapidly. The market will continue to evolve with some sectors growing and others declining, reflecting the interests of consumers and to some extent following the demographic profile of the population. In the next five or ten years the 40-50 year-old age group is going to grow, and these people will want to read something. Publishers need to attract this audience, although I suspect that obvious targeting of the 'grey' market is unlikely to be successful - these people do not think, act or want to be 'old'.
Advertisers also need to be less narrow-minded. How often do we hear that the target market is aged 25-44? The implication being that once over 44 we no longer buy things! In the last 12 months nearly half of all car purchases were by people over 45. Advertising agencies might realise this in ten years time, and we might just see a shift towards targeting these groups.
Consumers are fickle and are becoming more so. Dwindling customer loyalty is a problem facing all marketers of consumer goods and we have witnessed how the supermarkets, airlines and the petrol retailers have responded to this threat with various customer loyalty programmes. In the magazine world this initially resulted in increased competition between rival titles, in a bid to engage the increasingly fickle repertoire buyer. This manifested itself in the form of cover-mounted gifts and cut-price offers (to encourage sampling), added-value supplements (often covering salacious sex themes), and increasingly frenetic front covers trying to shout louder than their competitors to gain the readers' attention. Just look at the women's weeklies market and now the 'laddish' men's lifestyle market.
There is now a realisation that this tactical activity does not solve the problem of waning customer loyalty. Indeed it encourages the consumer to be more fickle by being attracted to the latest 'one-off-offer', boosting short-term copy sales but not doing anything to build long-term stable circulation growth. What is needed is increased brand differentiation and clear brand values. Magazines that offer the consumer a real USP will retain a loyal following (for example, Hello!, Marie Claire, New Scientist and Take A Break). So one trend I believe we will see over the next few years is the improved marketing of consumer magazines: editors and publishers, working together to clearly differentiate their magazines from their competitors, through differentiated editorial and marketing techniques.
Trends in fashion will come and go, and as magazines position themselves with their audience they will reflect, and to some extent determine, these fashions. It appears that these trends now operate on ever-shorter life cycles. The early 1990s 'new man' image was quickly succeeded by the beer-drinking 'loaded' image of young men, and the press is already predicting their demise. (Frankly, I think that they have got it wrong. Politically correct or not, what Loaded does so well is appeal to deep-seated and long-held core male values, sad though that may be!)
As the life cycle of fashion trends speeds up, so should the life cycle of magazines. Publishers of young women's magazines already know this: look at how EMAP (quite rightly) refreshes its portfolio every few years, happily cannibalising its own titles to launch the latest 'faddish' magazine. I suspect that shorter life cycles are likely to become a part of many consumer magazine sectors.
THE IMPACT OF TECHNOLOGY
Technological change will have an important influence in the way that magazines develop. Most notably, ink-on-paper will not be the only means by which people access and enjoy editorial content. New distribution mechanisms such as the Internet, interactive TV, and CD-ROM offer a range of possibilities.
Although new media are unlikely to have a major impact on the consumer magazine market in the short term (the penetration of the Internet is relatively low and is likely to remain so for some time), these media formats can offer distinct advantages for the consumer. For example: easy access to classified/recruitment ads and a mechanism to respond directly; the ability of readers to tailor-make information to suit their needs; to interact directly with other readers or the editorial teams; and to conduct transactions directly with advertisers. Publishers will recognise those titles that can be readily transferred to an electronic format while offering the consumer a benefit, and those brands that are already well-known and trusted by their readership will have the 'pulling power' to win. New Scientist's Planet Science site is a good example of this - readers can (and do) access the recruitment ads on a bespoke basis and apply direct. And once publishers have convinced the reader that the electronic format offers a benefit (ie an audience is created), ad revenue will follow.
We must remember, however, that readers of consumer magazines enjoy the pick-up, put-down portability of magazines, find the visual images stimulating and, most importantly, find reading magazines entertaining. There is nothing entertaining about reading features on a VDU. For these reasons, although I believe that new media will become increasingly important over the next few years, I expect Internet or on-line magazines to complement rather than replace their ink-on-paper cousins.
Technological change will influence the shape of the consumer magazine market in other ways too. Briefly:
LEGISLATION AND OTHER LEGAL ISSUES
Legislative changes may also affect the future of magazines. The threat of VAT being imposed on magazines is particularly important. An across-the-board increase in cover prices by 17.5 per cent could reduce copy sales by as much as five or ten per cent (this would of course vary from sector to sector). Presumably, there would be a shake-out, with those magazines that just break even being forced to close.
In theory, this reduction in copy sales would be across-the-board, with publishers being affected equally. However, this may not happen in practice. Each publisher will make its own decision, to pass the entire VAT burden directly to the consumer, or partially to absorb this extra 'cost' themselves, in effect reducing the pre-VAT cover price and so accepting a reduced margin. In an increasingly competitive environment (where cover price is a useful tactical tool), some publishers may be prepared to accept lower margins.
Other legal issues will also have an impact, for instance copyright initiatives. Many consumer publishers are aiming to increase ownership of editorial copyright. Once they own this material publishers can republish it in any format (magazines, electronic, books, etc), in any country (to licencees or via syndication) and at any time.
On a simplistic level this does not seem favourable for the original contributor. In the past, material commissioned for magazines has generally been used only once. Now, there is a much bigger 're-use' market, and it is publishers who have created this marketplace. They have had to bear the cost and risk of setting this up, and so (rightly) they want to gain the majority of the financial rewards associated. However, those publishers who are willing to share this reward with the originators are more likely to gain their co-operation. In reality the contributor will get a fair deal, their material will be worth more (the market for it is bigger), their work will get increased exposure, and they will not have to make an investment to do it.
Two other factors will also affect consumer magazines:
First, the ITC's new sponsorship code means that masthead programming is now a reality. Consumer publishers will be allowed to extend their brands, but unlike the BBC, this will be only from magazine to TV (satellite and cable only, not terrestrial). In which case, BBC Enterprises will not have such a brazen and unfair monopoly advantage. We shall have to wait and see what magazines are appropriate, and how successful this will be in practice.
Second, there is a trend towards greater cross-media ownership. For example: the United News/MAI merger; EMAP's interest in the consumer and business press, radio, and a possible tie-up with GMTV; and the Pearson buy-out of Future along with a number of other recent acquisitions. This is an interesting trend. If these cross-media companies fully exploit the synergies that accrue (access to an audience by whatever medium is most appropriate), they could become very powerful, offering advertisers unrivalled advertising opportunities. Indeed, unrivalled might mean monopolistic power. However, exploiting these synergies might not be that easy in practice.
Consumer publishers will be squeezed from all sides - from the consumer, through the distribution chain, and from their competitors. This will put pressure on these publishers to become more professional and more efficient in every area of their business. But consumer magazine publishing is, and will remain, attractive, and the winners will be either a) larger publishers who can exploit the advantages of economies of scale and negotiating leverage, or b) small, flexible and responsive publishers who can respond quickly to customer's needs. Publishers that fall between the two could have problems.